No Differing Conditions Where Contractor Could Have Inspected Site

A contractor claimed differing site conditions were to blame for delays and the eventual termination of a government contract. But an appeals court ruled the contractor was at fault, despite reassuring geotechnical information, for failing to double-check the soil stability of the site.

In 2007, Meridian Engineering Company (Meridian) entered into a $5.8 million federal government contract to construct flood control structures in Nogales, Arizona. The work involved building several concrete channels, relocating a sewer line, dewatering, and diverting water. During its contract performance, Meridian encountered instances of “subsurface organic/unsuitable material”---specifically, “a layer of dripping saturated dark clay material under which a clean layer of sand” was producing water.

After Meridian notified the government about the “soupy” soil, the government issued several contract modifications---for instance, to add a reinforced concrete ramp, to investigate soil properties, and to remediate saturated soils. Ultimately, after a series of structural failures, the government cancelled the contract in September 2009.

Because the parties couldn’t agree on the final payment due to the contractor, in July 2011, Meridian sued the government for breach of contract, breach of the duty of good faith and fair dealing, and violation of the Contract Disputes Act. In Meridian Eng’g Co. v. U.S., 122 Fed. Cir. 381, 2015 U.S. Claims Lexis 905 (2015), the Court of Federal Claims ruled that Meridian failed to prove Type I differing site conditions (DSC) were to blame for project delays and extra costs. A recent appeal---Meridian Eng’g Co. v. U.S., 2018 U.S. App. Lexis 7024 (March 20, 2018)---followed.

To prove Type I DSC---that is, site conditions that differ materially from what the contract promises---the contractor must prove that: “(1) a reasonable contrac[..]